5. One of your clients has an initial endowment of $10,000. He is considering buying home insurance. He estimates the probability of a damage to his house, costing him $1000, to be 0.2. a) Suppose he is risk neutral. What is the maximum premium at which he is willing to buy the insurance policy for $1000? b) Suppose now he has constant relative risk averse preferences. State the condition to determine the premium that would make him indifferent between buying the policy for full insurance and not. c) Suppose now he does not have to buy necessarily full insurance. He can insure any value K between 0 and $1000. His coefficient of relative risk aversion is 1. Compute the amount K you would advise him to buy for a premium of $0.21 per dollar insured. 5. One of your clients has an initial endowment of $10,000. He is considering buying home insurance. He estimates the probability of a damage to his house, costing him $1000, to be 0.2. a) Suppose he is risk neutral. What is the maximum premium at which he is willing to buy the insurance policy for $1000? b) Suppose now he has constant relative risk averse preferences. State the condition to determine the premium that would make him indifferent between buying the policy for full insurance and not. c) Suppose now he does not have to buy necessarily full insurance. He can insure any value K between 0 and $1000. His coefficient of relative risk aversion is 1. Compute the amount K you would advise him to buy for a premium of $0.21 per dollar insured